23 December 2013
The term ‘value creation’ has become almost a buzz terminology in the recent days across our work places. Every piece of your work/service should carry some value. Although measuring the magnitude is a very subjective and debatable matter, people tend to measure it in terms of their expectation. It is often measured in terms of the payment made to you against the respective service you have provided. Perhaps it is not very important criticizing the way people measuring such value; rather one should try to grasp the intrinsic sprit of such expectation! It is critically important to realize what is value in my work and how can I generate the best of it satisfying my customers and employers. Disregarding the conventional definition of value we can try to redefine it in the light of our service fields.
A service would be recognized as value generating, if it helps a business house avoiding various fiscal risks, fighting competitions effectively, safeguarding assets, reducing costs of business, creating more business opportunities and last but not the least making more profits.
When the caption has been chosen using the term accountant, we would limit our discussion around business houses and in broad term the field of trade and commerce where accountants are expected to play a pivotal role. The focus of this discussion will throw lights mainly on the qualified accountants, and more close to the Chartered Accountants. Accountant in a business society is one of the vital organs which if functions well many things of the organisation go well otherwise result goes adverse. Perceiving this critical reality, accountants at any place, be at service or private practice may try to reopen their pages where they might find their responsibilities and deliverables which their customers expect out of them. Accountants of today must be capable of producing very high quality services which enable a business house to ensure sustainable growth mitigating various financial risks and risks of fiscal compliances.
Big picture-wise accountants work in two fields, such as:
A. Accountants in service, and
B. Accountants in private practice
It is critical that one can add or create value to the respective services based on one’s capacity. So it may be equally critical to briefly discuss about the field where accountants prepare themselves to be capable of providing services to their customers.
An ideal accountant creating value in the field s/he works is expected to have minimum following critical qualities:
1. COMMUNICATION SKILL (Conversation/presentation skill)
2. TECHNICAL COMPETENCE, and
3. ETHICAL SOUNDNESS
In addition to the above, although not critical, one might possess some extra capabilities enabling one to be more confident and thereby effective. For example, having driving skill with a valid driving license might give you an extra strength. Likewise, you may have debating skill, update knowledge on the ongoing national and international hot topics, knowledge on national and international history, reasonable knowledge on national/international politics, knowledge on ongoing important sports events and so on.
The curriculum of the accountants in various institutes which produce accountants very well covers all these three critical objectives. But surprisingly accountants are badly criticized today for their failure in demonstrating any one or more of these qualities. In rebutting the market criticisms we often argue that market does not pay us well, rganization do not empower us doing more, marketing people in the rganization get more attention and so on. As a member of the accountants’ fraternity, I strongly believe that nothing of these would help us unless we try to recognize and work on our own weaknesses!
Accountants in many cases proclaim themselves to be expert in their field of working, at least in the fields of accounting, auditing and taxation. But they might not know that their own evaluation is not good enough so long it does not meet the expectation of the customer. Moreover, they also might not know that their conventional expertise is not well usable unless it is marrying with many other modern dynamics. For an example, an accountant without knowledge of information technology is just not a very useful one today. Taking few examples of weaknesses from the market generally accountants suffer from, we can categorize them under the criteria as mentioned above:
1. Communication Skill – Accountants hardly demonstrate courage to share a new idea in the senior management meeting
– They tend to find risk without assisting management to move forward with alternative mitigating factors
– They feel shy presenting things before the audience, even if it is their core strength area
– They do not feel attending cross functional meetings and programs
– They hardly see success in the negotiation meetings
2. Technical Competence – Accountants tend to remain accountant where market perhaps want them to be business managers
– Lack of appropriate knowledge of IFRS/BFRS and other reporting standards
– Auditors including audit staff lack appropriate knowledge of ISA/BSA
– Lack of knowledge of information technology and related modern developments
– Lack of analytical skill
– Lack of writing business literature and articles
– Lack of knowledge on the contemporary legal and fiscal matters
– Ignorance about the width of their field of services, and so on
3. Ethical Soundness – Lack of precise knowledge about ethical codes (IFAC prescribed) applicable for the accountants working at different capacity
– Inappropriate or no application of ethical codes
– Inappropriate use of accounting and auditing standards
– Unprofessional assistance to the clientele
– Non-support to the development requirement to the audit staff
– Use of unskilled manpower in highly sensitive assignments
– Not acting in the “Public Interest”
– Lack of appropriate safeguard for conflict resolution measure
– A clash of responsibility
– Not following rules which professional are expected to follow by their profession
– Poor quality work
While listing above few of the weaknesses, it is not intended to provide a conclusive list, nor is even it possible. We may now revisit our own capacity and the field where we gain such capacities in the light of the foregoing discussions.
1. COMMUNICATION SKILL
Long way back I read from an American business literature, that ‘one is sufficiently knowledgeable but cannot express oneself would be counted half’. This is talking about communication, more of conversation skill. Indeed this is one of the areas we have substantial weaknesses, but surprisingly our focus on this area is not noteworthy. Although skills related to drafting letters, emails and various reports fall under the category of communication skill, we will discuss this part later in the Technical Skill area. Let us pay some focus in the fields from where our trainee accountants are expected to gain such skill sufficiently. The organisations where we offer training are:
– Related Institute (ICAB- not considering others in this write up)
– Professional firms (CA Firms)
Conversation skill in both Bengali and English are essential, but English being mostly used as business language, we will pay more focus in this area.
Institute as learning platform
The ICAB has best possible curriculum to make marketable accountants at this point in time. But it offers only few classroom based coaching classes in two or more sessions in the year which discuss more of examination oriented topics than market oriented skill requirements. The other aspect of this arrangement is just a mandatory requirement of class attendance as a matter of prequalification to be eligible for professional examinations. Therefore attending such classes simply encourages students to meet their mandatory attendance requirements and examination preparation. It is clear that, focus of learning about marketable skill is badly missing here, whereas a student immediate after his qualification is attained is treated to be a professional accountant.
The students hardly get any chance to interact with teachers and other students on the matters which are important for the profession at market level. There is no course that offers scope of conversation on the market matters with teachers or vice versa. So far as I know there is no urge from the Institute upon the teachers creating special environment that would encourage students overcoming their inertia of tongues. Moreover, Institute does not have a requirement for the qualifiers to be member to the body, even the incumbent might not be capable of speaking out of confidence and knowledge. As of now, merely passing all professional written examinations is good enough to get a passport to enter the world of accountants. Institute might introduce:
– Few of the classes during the coaching session mandatory for conversation skill on various pre-identified market topics
– A brief but mandatory interview prior to qualifying each level of the professional examination
– Prior to offering final result, a mandatory standard presentation based on a pre-selected topic
It is understandable that Institute believes all firms where students get their working experience would offer adequate scope for the students to learn both technical skill and communication skill. Here it may be worth mentioning that, merely a belief might not be good enough unless there is solid monitoring on the part of the Institute being the sole licensing authority. It needs to be remembered that in reality ground, the Institute gets the bad name for the failure of an accountant. It is a CA produced by the Institute has done a sub-standard work, or not being able to perform up to the expectation, or as performed an unethical task! Whatever criticisms we come across from the market are not just rocket science which accountants cannot overcome. So, it appears that Institute is at fault for all failures and not taking suitable measure.
As part of Continuous Professional Development (CPD) responsibility for the members, Institute organizes various seminar and workshops where only qualified accountants (members) are invited to join. Again, not having solid base of communication the present audience ensure a very little participation. A substantial number of accountants just attend making sure that their annual CPD credit hour requirement is met. As a result, the expected output in terms of members’ development does not appear to be well achieved.
professionals may work in a different field or he may not be working in accountancy related position and the topic selected may not serve his workplace development. For example a chartered accountant may decide to run his own poultry firm business or transport business. So training on strategy development may better applicable rather than training on ISA-20
ACCA CPD require to fill out a predefined form containing question as follows
– Description of the development/learning activity.
– Why did you choose this activity and how is it relevant to you?
– What did you learn and how did/will you apply it?
In view of the above, it is imperative that quality of the accountants is a subject that Institute always keeps at its high priority. Institute introduces suitable initiatives that enable future accountants to face market demands with high level of confidence. If necessary appropriate mechanism can also be devised through which Institute can monitor the professional development activities of the firms. Some sort of reward or punishment can also be introduced measuring the degree of the performance of a firm on their responsibility relating to the training and teaching to the students.
Professional firms as learning environment
Talking about Chartered Accountancy, students are mandatorily required to undergo an articleship period of 3 or 4 years depending upon the academic background with a professional firm, dealing with auditing, accounting, taxation and various other services under the license of the Institute of Chartered Accountants of Bangladesh. Under the articleship agreement, the proprietor of the firm is entrusted to provide a learning environment for the students on various professional matters enabling a student to be competent accountants facing and fighting market challenges. Here we are perhaps little bit confused about the training boundary.
Primarily it becomes the duty of a firm to teach or train a student about all technical pronouncements and standards directly relevant to the accounting and auditing profession. We hope to discuss this area later in a section dedicated for technical competence. As part of the training processes, students are put into various professional assignments into the clientele of the firm without or with very little briefing about the client’s business and required skill for that assignment. It is critically important that a student needs solid communication skill in successfully accomplishing the assignment. But surprisingly, this essential part of the overall required skill gets hardly any attention. On the contrary, similar to our conventional social culture, a student is always hesitant to speak to his mentor/principal. Most of the cases it becomes one-way traffic where the principal or a manager speaks and students listen with little counter speeches or none. In our society, from our boyhood age we learn not to raise voice over the elderly people and over time we become familiar to a situation where it seems that even asking question to an elderly man is also kind of disobedience. You have to always listen to the seniors until you turn to be a senior. Similarly in the firms students feel that it is just a duty to comply with the instructions of the seniors and principal. They will not ask question from the senior even if the instructions given by the principal or senior is unclear to him.
Moreover, firms do not offer appropriate program that deals with development of conversation/communication skill. As a result most of the students pass the whole period of articleship under a very suppressive working environment without learning how to smartly ask questions or describe something addressing a person or group of persons.
In the place of working in their audit or other assignments, students hardly meet and talk to higher officials like Managing Directors or other directors whereas they are required to, if they strictly go by the working methodologies. They end up completing their assignments talking to the mid-levels or to the best the Chief Financial Officers. Thus it can be uttered without any hesitation that most of the cases the output remains far from the desired level.
A student finally passes through all professional examinations and turns into a qualified accountant when markets expects him to straight forward contribute to the corporate in the role of a senior manager (Finance Manager/Accounts Manager/Internal Audit Manager etc.). Naturally this expectation entails with lot of high level responsibility to be delivered matching with the ultimate goal of an organisation. Here communication has pivotal role to play. Although one can still keep learning all required skills, it may create negative impression upon accountants’ capabilities if he/she fails to match the expectation.
A firm can take some initiatives so that trainee accountants/articled students would be benefitted as follows:
people learn things from 3 places
1. From Family 2. School/College 3. Society
If we want to improve English we can at least try delivery our lecture in English. The lecturer may play a vital role for improving English.
– There may be regular debating competition in both Bengali and English language. Communication skill in both languages is equally essential. But in this write up English has been given emphasis.
– Principal/Partners may encourage staff accountants to speak in English even they are not very comfortable initially. Here, Bengali conversation may be kept at lower extent;
– Firm may introduce in house training on spoken English
– Partners/Managers may make few things mandatory for presentation by the job-in charges before starting an assignment and after completion of the same. Here he may be encouraged to use bi-lingual approach with greater emphasis on English.
Although not conclusive, all these should be made regular activities in a firm with a mechanism of monitoring of the progress among the staff members.
2. TECHNICAL COMPETENCE
An accountant’s effectiveness is primarily measured in terms of one’s technical competence reflected in his/her deliveries. Thus, perhaps the first and foremost quality of an accountant should be technical competence in his field of service.
Being an inseparable part of an accountant’s fundamental learning, I would not much discuss about the requirement of the knowledge of accounting and auditing. Merely having knowledge in conventional accounting and auditing, an accountant would not add value to the today’s complex business environment and hence not be treated as a valuable accountant. Business people believe that processing accounting transaction is not the work of an accountant today. By the support of a computing machine, a graduate of history can also do the processing work.
An expert accountant has more critical functions dealing with processed data (financial figures) and related decision making processes in the business. On these processed data one has to lot of analysis applying technology, compliance requirements, and other requirements of the marketing fitting to such data to make them well usable by the decision makers. To describe this idea following hypothetical diagramed presentation is expected to give better idea:
Accountants’ duty in the past- Figure: 1
Accountants’ duty today- Figure: 2
From the given diagrams, it can be understood that accountants’ job used to be considered as mainly transaction processing and rest two were less important or tertiary. But over time the idea has been just reverse. Computing machines have widely grabbed the functions of transaction processing where the respective executive in duty does not need to have expert knowledge on accountancy. Situation has been so easy, that a history graduate can play the role of an accountant in some of the computerized systems. On the other hand, trade and commerce have become more complex where success and sustainability are heavily dependent on the critical analysis and appropriate use of financial information.
In the light of the above discussions, we can emphasize that today’s accountants must reposition themselves to be of required performance through attaining adequate knowledge and competence from their field of training; else they would continue to face criticisms.
To deal with the expectation as diagramed, an accountant must have appropriate technical competence. Such critical competence requirements can be briefly discussed in the in the following sub-categories:
i) Knowledge of IFRS and ISAs:
– Interpretation of IFRS and ISAs guidelines
– Application of IFRS/ISA guidelines in respective fields
As part of global convergence towards harmonized accounting and auditing practices, companies (mandatory for listed companies) in Bangladesh also need to prepare their financial statements complying with IFRS guidelines. However, in order to ensure possible best practices, from the date of promulgation of the International Accounting Standards (IAS), it has always been imperative for the organisations to prepare their accounts in line with IAS guided framework. But the level of response from the organisations was miserably poor. In the recent days, remarkable effort is being noticed particularly in the listed companies. But still we have lot of mileage to go on this path.
Professional accountants have substantial role in the process of implementation of such objective. While preparing or guiding preparation of financial statements respective accountant needs to have adequate interpretation capacity of the requirement of the respective IFRS. Similarly while auditing the financial statements, the respective audit staff must be capable of reviewing, if the reported facts/figures were appropriately measured, valued, interpreted in the light of the requirements of the IFRS.
As already described in the foregoing sections, Institute operates curriculum based academic coaching classes which are far away from the market focus. May be Institute does not want to separately offer learning environment as CA firms are expected to offer adequate training on IFRSs and ISAs to their trainee students. If so, Institute must ensure through appropriate initiatives that accountants gain appropriate knowledge before entering the market. They should also ensure through proper monitoring that all firms undertake minimum initiatives towards development of market based technical skills as regards IFRS and ISA to their students and staff members.
On this area Institute and firms can complement by offering following activities:
– As a regulatory body Institute may consider enacting IFRS mandatory for all companies. This would create an urge among all accountants to learn more about IFRS and ISAs;
– On regular basis, Institute may offer training on IFRS and ISAs as the case may be, on payment of requisite fees;
– Institute may publish any changes on IFRS and ISAs immediately on their monthly magazine.
– On certain interval Workshop may be very useful for the members (not just current CPD type) picking up practical cases of IFRS issues from the market;
– Firms may organize training programs for their own students. They can even use their own brilliant staff members as instructors. This would tremendously benefit all parties in the form of students’ (future accountants) development, firms quality initiatives, and last but not the least our ultimate customers at market level.
To build capacity on this area, some leading firms may make trainers in their own house through offering training inviting expert trainers from international market.
ii) Knowledge of Fiscal and Corporate laws
This part of the skill has direct impact on the performance of an accountant. Hence an accountant must be appropriately capable of using and interpreting fiscal laws (Income Tax and VAT) and certain aspects of other corporate laws, like Companies Act, Banking Companies Act, Foreign Exchange Regulations, Capital market Regulations etc.
On this area, knowledge on Income Tax, VAT and Companies Act is relative more necessary for the success of an accountant.
iii) Various analytical knowledge
Analytical skill has no clear boundary. An accountant is expected to be able to assist the decision making authority with adequate inputs analyzing processed financial numbers. Such analyses would highly depend on the nature of the organisation, related regulation, nature of the user etc. Sufficient knowledge on financial tools, respective regulations, related technology and related market information can make an accountant effective in analyzing data for the decision makers. We should remember that the effectiveness of a decision has very high dependence on the data we provide.
In the recent days, computerized financial environment has made our lives much easier. By applying our knowledge on computer applications or buying suitable applications from the market we can make sharpen our analytical capacity. In a nutshell, all we need to be well equipped with analytical knowledge based on the industry requirement we represent.
On this area practicing firms can do a lot for the trainee accountants. Rather than working conventionally, firms can encourage their staff members to effectively apply analytical tools in accomplishing respective assignment which would in turn enhance our value in the market.
iv) Good writing skill
This is an essential skill one accountant must be gaining throughout the career. Every single day an accountant is to write something to describe results and facts of the transactions to the superior authority and decision makers. Everything including various numeric/diagramed analyses, calculations etc. is good with poorly written narrative reports, the face of the accountant would be black on the table of the superiors. Due to the poor narrations the decision makers might find the report confusing and thereby misleading.
On the other hand accountants dealing with public practices are to write various types of reports communicating results of their review, appraisals and tests. Without good writing skill success on this area is almost impossible.
Therefore the necessity of good writing skill for an accountant is beyond question today. Few initiatives on the part of the Institute and the respective firms may help improving writing skill of the accountants:
– There may be writing competitions among the students on emerging market topics organized by the Institute;
– There may be one Magazine dedicated for the students write up only. Institute as it does for its members and other communities through The Bangladesh Accountant, it should also introduce a similar magazine for the students;
– Institute may introduce separate training courses on writing skill development;
– Firms should also seek suitable alternatives that help students improving the quality of their write ups.
v) Knowledge of related ICT
There is no debate today that an accountant is to be substantially capable to work in a computerized environment. From data processing to various analyses, computer has been increasingly popular. A computerized environment offers speed, efficiency and last but not least the accuracy of data. Over time computer has grabbed a very wider space of accountants’ job. From small to large enterprises, everywhere people are deploying computerized accounting systems removing their manual books of accounts.
In an effort to deploy major business systems or an ERP (Enterprise Resource Planning) on the part of a business house, the CFO has most substantial role in the successful implementation. People have fallacy that an I system deployment should be taken care of by the IT Manager. This is a wrong perception; in essence, conversion of conventional business system into IT enabled environment cannot be an IT project, indeed a business project where experienced business Manager (CFO or Sr. Finance Manager) must be key role player.
In the recent days entire auditing processes have been turning to be computerized incorporating requirements of ISAs. So, accountants both in practice and service today should be capable to deal with computerized accounting. An auditor having knowledge merely on accounting and auditing may not be able to satisfactorily do an audit in a computerized accounting environment. Hence, dealing with both accounting and auditing in a modern business house an accountant must be skilled in computer technology. An accountant must have minimum working knowledge on:
– Spreadsheets with ordinary to very highly technical analysis
– Various computerized accounting systems;
– Various control techniques (General Control and Application Control) around computerized environment
– Word and various data processing
Better knowledge on computerized system may create opportunity for the practicing accountants to open a new service for their clientele. They can offer designing suitable accounting systems including appropriate chart of accountants. On this area firms can allow their trainee accountants to:
– Participate in suitable training programs on spreadsheet analysis;
– Take suitable programming courses
– Participate in the project management deploying major business systems (ERP, major and complex accounting systems)
vi) Other pertinent knowledge
– Knowledge of capital market operation;
– Knowledge of macro economics supporting national economy;
– Knowledge of corporate secretarial matters, and so on.
3. ETHICAL SOUNDNESS
Ethics in a profession, in fact sit in the heart of respective professionals. Without having appropriate ethical value, an expert professional is as good as another unscrupulous person in the society. It is to be remembered that the knowledge of ethics must be well discussed among professional as well as trainee accountants. Due to improper understanding and use of ethics by the individuals, the entire community gets blamed of unethical behavior. Unethical practice by the professional accountants may create serious damage in the trade and commerce, which in turn badly affect the economic development of the whole nation.
Ethics have been defined as the study and application of moral principles and values that govern the actions and decisions of an individual or groups. While personal ethics vary from individual to individual, at any point in time, most people within a society are able to agree as to what is considered ethical and unethical behavior. In putting human behavior in right direction, in fact a society passes laws and regulations that define the presence/non-presence of ethics in an action or a set of actions.
The pattern of ethics may vary in different professional context of actions and behaviors. However, the question of ethics arises when people are in relationship with duty and responsibility bondage. The relationship between public accountants and clients offers a number of interesting challenges. The society or a client has expectations where a public accountant performs duties and responsibilities to them independently and being unbiased.
Professional Ethics and Professional Accountants in Bangladesh
In codifying the behavioral pattern of professional accountants, IFAC has promulgated a set of code of ethics for its member bodies to follow. ICAB has hence, adopted those ethical codes and published in its members handbook captioned ‘Hand book of Bangladesh Standards on Auditing, Assurance and Ethics Pronouncements’ for its members to put in their practice effective from January 01, 2009.
To fit into the business of accountants the entire set of ethical codes has been described in following 3 sections in the Hand book:
Part-A: General Application of the Code
100 Introduction and fundamental principles
130 Professional competence and due care
150 Professional behavior
Part-B: Professional accountants in public practice
210 Professional appointment
220 Conflicts of interest
230 Second opinions
240 Fees and other types of remuneration
250 Marketing professional services
260 Gifts and hospitality
270 Custody of client assets
280 Objectivity- All services
290 Independence- Assurance Engagements
Part-C: Professional accountants in business
310 Potential conflicts
320 Preparation and reporting information
330 Acting with sufficient expertise
340 Financial interest/Public interest
In addition to the effort of the Institute as a matter of curriculum activity, the professional firms have substantial role in building solid ethical backbone of the profession. Like all technical skills, trainee accountants are expected to learn how to deal with various element of ethics into their day to day work. In this regard, firm may:
– Discuss on a regular basis with the staff and accountants on the potential consequences of unethical practices;
– Conduct in-house training for the trainee accountants based on the literature in the above mentioned handbook;
– Organize workshop picking up suitable cases as examples, so that the understanding gets clearer;
– Introduce suitable penalty for diluting ethics into the professional duty;
Public interest: How many people would be affected by our action
– Are these people that we know or care about
– The speed of the consequences
– The impact and likelihood of the consequences
– How society would view our action